Davies & Ors v Financial Services Authority

A financial regulator may use its prohibition powers in response to past misconduct where that conduct indicates that an individual is not fit and proper and an order would protect the public in future. The expiry of the limitation period for disciplinary action does not prevent recourse to a distinct prohibition regime. The regulator need not establish that the individual presently intends to perform regulated functions.

Judicial review is a remedy of last resort. Decisions amenable to representations, de novo review by a specialist statutory tribunal and a subsequent appeal should ordinarily be challenged through that scheme. The Administrative Court should intervene only in the most exceptional cases.

The Financial Services Authority issued warning notices under section 57 of the Financial Services and Markets Act 2000, proposing prohibition orders against former financial-services employees on the ground that they were not fit and proper persons. Earlier proceedings brought by the Authority's predecessor had been discontinued following a change in the regulatory regime.

Lightman J refused permission to seek judicial review, holding the proposed grounds unarguable: [2003] 1 WLR 1284. The applicants appealed. They contended that the Authority was improperly using the prohibition regime to circumvent the expired limitation period for disciplinary action, that no order was needed because they had no immediate plans to work in regulated financial services, and that the Authority had departed from its published guidance.

The appeal also raised whether judicial review should be withheld because the statutory scheme provided representations, a de novo reference to a specialist tribunal and an appeal on a point of law.

1. Appeal dismissed unanimously. Mummery LJ delivered the leading judgment. Carnwath and Kennedy LJJ agreed. The proposed grounds of judicial review were unarguable, and the application was in any event unjustified given the available statutory procedure.

2. There was no clear division under the Financial Services and Markets Act 2000 between a prohibition procedure concerned only with future prevention and a disciplinary procedure concerned only with punishment for past misconduct. Both procedures were regulatory. Section 56 could be used where past misconduct indicated that an individual was not fit and proper and prohibition would provide necessary future protection. Section 66 was not the only provision available in respect of past misconduct, and the expiry of its limitation period did not bar the distinct section 56 power.

3. The earlier regulatory proceedings had themselves included a forward-looking allegation that the applicants were not fit and proper persons. The Authority was therefore not merely continuing time-barred disciplinary proceedings by different means. Section 56 was the appropriate procedure for pursuing prohibition with that objective. Prohibition and disciplinary action could also communicate that conduct was unacceptable and deter others.

4. The Authority did not have to establish a present or future intention to work in financial services before giving warning notices. It was sufficient that the applicants appeared to it not to be fit and proper persons. Their plans and intentions were factual matters for representations to the Authority or, if necessary, a reference to the Tribunal. The challenge based on the Authority's published guidance was also unarguable.

5. Judicial review is a remedy of last resort. Absent exceptional circumstances, an applicant should first exhaust available procedures for objection or appeal. The statutory scheme provided representations, a de novo reference to an independent specialist Tribunal capable of deciding questions of law and jurisdiction, and an appeal to the Court of Appeal. Its legislative purpose was that those procedures, rather than the Administrative Court's general jurisdiction, should ordinarily be used. No exceptional circumstances justified bypassing them.

6. The application was also premature because warning notices alone had no legal effect or adverse consequences. The court nevertheless did not rely on prematurity alone, since decision notices and prohibition orders were reasonably likely to follow. The applicants were ordered to pay the Authority's costs, subject to detailed assessment if not agreed. Permission to appeal was refused.

1. Court of Appeal (Civil Division): The appeal was dismissed unanimously: [2003] EWCA Civ 1128. The court upheld the refusal of permission for judicial review, ordered the appellants to pay the respondent's costs and refused permission to appeal.

2. Administrative Court: Lightman J refused permission to seek judicial review after an inter partes oral hearing of the renewed application: [2003] 1 WLR 1284.